I was cleaning up this Stanley "D" chisel and there was some  gunk ( glues or resin) at the tip. So  went over to the wire wheel got the gunk off. Then used the expander wheel (sand paper of a flex wheel)That highlighted the  problem. I've seen  chisels overheated from grinding but this doesn't look like anything I've seen. What caused this??? I always check the tips but this was something different! They certainly ruined a good chisel!!!

Odd one. Would have to guess it's a flaw in the steel, all the way from the foundry.

My guess, too.

Really odd.  Is it possible it is poor sanding/flattening as a result of a convex back?

To me it could be poor forge welding off tool steel to the base steel.  Normally you see it  near the edge of the blade  parallel to the edge.This just looks like it's flaking? Never seen  metal fail like this?

Maybe that is why it is a D chisel, Defect.

If you ground off the defect, how much length would you have left?  Short chisels have their uses.

I don't have it in front of me, but the  blade/shaft is 4-5" or so, the bad part is  more than an inch.  I was thinking many are just hard at then end / tip, I'd lose  it's cutting edge.

I think it is the same steel all the way up. From  the catalog: " The head, shank, and blade are are forged from one piece of tool steel" I have seen these in use ground down to an inch of blade length, still sharp, and still usable. Think of it as a pocket sized chisel!!!